The Signing Bonus: A New Incentive to Attract Talent
Widely used in Luxembourg, financial and non-cash benefits enable employers to attract highly sought-after professionals. Among these incentives, signing bonuses are attracting increasing interest. In a context marked by competitive remuneration packages and difficulties in recruiting qualified professionals in specific fields, this incentive could become increasingly important.
In Luxembourg, employment law allows employers to offer their employees attractive remuneration packages. As not all aspects are regulated, employers enjoy a certain degree of flexibility in this respect, provided that their benefits policies do not contravene public policy. “Luxembourg offers numerous advantages to attract talent. First and foremost, salaries are particularly attractive,” comments Catherine Wagener, Avocat à la Cour. Taking into account wages and salaries as well as non-wage labour costs (employers’ social security contributions), Eurostat ranks Luxembourg employees among the most expensive in the EU, at EUR 43 per hour.
Attracting and Retaining Experienced Talent
Other benefits may vary depending on the sector of activity and the experience of the professionals being recruited. “The more specialised the company’s field of activity and the more experienced the profile required for the position, the more attractive the remuneration package must be,” adds Elodie Rousseau, Avocat à la Cour. Among the most common benefits are meal vouchers, company cars, fuel cards and the provision of IT equipment (mobile phones, laptops, etc.). “These benefits in kind must comply with the principles of non-discrimination and equal treatment among employees belonging to the same category.”
Other, less common benefits mainly concern positions requiring highly qualified professionals, often recruited from abroad. “Employers may provide accommodation and cover employees’ children’s school fees. They are also free to subsidise loan interest, finance supplementary health insurance contributions or offer supplementary pension schemes, as is often the case in the banking sector. Finally, in large organisations, employees are frequently given the opportunity to acquire shares in the company through stock option plans,” explains Catherine Wagener.
The Signing Bonus: An Increasingly Popular and Attractive Incentive
Relatively common in Anglo-Saxon countries and the sports industry, signing bonuses (sign-on bonuses) are beginning to emerge in Luxembourg employment practices. “While this practice was previously very uncommon in Luxembourg, we have received several enquiries on the subject in recent months. Employers wishing to introduce such bonuses consult us to ensure that they comply with Luxembourg law and to understand how they can be implemented.”
This benefit consists of a one-off financial payment that an employer undertakes to make to a new employee upon joining the company. Its primary purpose is to attract specific or highly qualified professionals who are often difficult to recruit and encourage them to join a new organisation.
“From a legal perspective, we do not see any particular issue with this practice. It is not prohibited by the Labour Code. Ultimately, it is a specific form of bonus that is not conditional upon achieving objectives or results, but rather upon the employee’s recruitment itself. However, practical difficulties may arise. Very often, employers also wish to make the payment conditional upon the employee’s commitment to remain with the company for a certain period, generally at least one year, failing which the employee must repay the bonus. Case law may then consider such a clause to be potestative (dependent on the will of one of the parties), particularly where the employee is dismissed before completing the minimum period of service, and therefore contrary to employment law,” explains Elodie Rousseau.
If an employee resigns before completing the agreed period of service, recovering the bonus may prove difficult in practice. “To protect employers against this risk of abuse, we could advise them to defer payment until the end of the agreed minimum period of service or to spread the payment over monthly instalments. This way, in the event of premature resignation, the employer’s financial loss remains limited. It may also be useful to establish the repayment terms in an amendment to the employment contract,” she concludes.
Although its practical implementation still raises questions and requires certain adjustments, the signing bonus could become an increasingly common incentive for attracting new talent in Luxembourg, where employers are currently facing recruitment difficulties.
For further information, please contact:
Elodie Rousseau, Counsel : elodie.rousseau@btplawyers.lu